Political uncertainty hinders enthusiasm

The FT’s Katie Martin on what to watch for in markets today. A rate rise in the next Fed meeting appears almost certain, although political uncertainty due to Trump comments, North Korean missiles and French elections are curbing enthusiasm.

Transcript

From the FT in London, here is the latest the markets. Markets are being pulled in opposite directions. On the one hand, you have swelling expectations that the US is set to raise interest rates again this month. The market now sees a near 100% chance that the Fed will bite the bullet given the constant stream of suggestions from Fed officials, most notably, Janet Yellen on Friday.

The Fed hates surprises. It likes to butter up markets for rate rises, and the market is duly listening. That's all a negative for US government debt, and indeed, some measures show record-breaking negative bets on the 10-year bonds. But those bonds are exactly what investors like in times of stress. And there's a decent dose of that today with North Korea firing test missiles into the Sea of Japan and Donald Trump launching [? bunchy ?] allegations at his predecessor over the weekend.

For the US, Trump's outburst compromises the restrained image he has been cultivating of late and has helped market sentiment. Futures suggest this could prompt some profit-taking in US stocks. Meanwhile, stress around Marine Le Pen's chances in the French presidential elections are denting the euro.